This comprehensive case requires students to evaluate a static budget and prepare flexible budgets to meet managerial needs. Students are required to calculate and analyze variances and discuss how variances are critical to managerial decision making.

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Scenario: Green Pastures is a 400-acre farm on the outskirts of the Kentucky Bluegrass, specializing in the boarding of broodmares and their foals. A recent economic downturn in the thoroughbred industry has led to a decline in breeding activities, and it has made the boarding business extremely competitive. To meet the competition, Green Pastures planned in 2017 to entertain clients, advertise more extensively, and absorb expenses formerly paid by clients such as veterinary and blacksmith fees.

The budget report for 2017 is presented as an attachment. As shown, the static income statement budget for the year is based on an expected 21,900 boarding days at $25 per mare. The variable expenses per mare per day were budgeted: feed $5, veterinary fees $3, blacksmith fees $0.25, and supplies $0.55. All other budgeted expenses were either semifixed or fixed.

During the year, management decided not to replace a worker who quit in March, but it did issue a new advertising brochure and did more entertaining of clients.

Develop a minimum 700-word examination of the financial statements and include the following:

Based on the static budget report:

What was the primary cause(s) of the loss in net income?

Did management do a good, average, or poor job of controlling expenses?

Were management's decisions to stay competitive sound?

Prepare a flexible budget report for the year.

Based on the flexible budget report:

What was the primary cause(s) of the loss in net income?

Did management do a good, average, or poor job of controlling expenses?

Were management's decisions to stay competitive sound?

What course of action do you recommend for the management of Green Pastures?

Show your work in Microsoft® Word or Excel®.

Complete calculations/computations using Microsoft® Word or Excel®.

Format the assignment consistent with APA guidelines.

Click the Assignment Files tab to submit your assignment.

Please use attached income statement and grading guide to ensure assignemnt is correct

Answer 1:
The primary cause of loss in net income was that the number of boarding days has decreased in the actual as compared to master budget. Drury, C. (1994) suggested that a master budget aggregates all the lower level budgets of various functional areas of a c